Stocks surged with a broad rally that lifted most boats. All major indices were up 3% or so. The Russell 2000 (+3.48%) slightly outperformed the S&P 500 (+2.95%). The Russell 2000 should have been up 5% on a day like today (damper number 1). All sectors were up with five of the nine gaining 3% or more. Materials and energy, which were the most beaten down, had big gains. Technology (+2.42%) was relatively weak for damper number 2. Volume was average and below the levels seen earlier in the week for damper number 3. Despite these dampers, breadth was very strong for the third time in three weeks. The problem, of course, is that we have yet to see strong breadth follow through. The chart below shows the NYSE AD Line and Net Advances. While the NY Composite moved to new lows in June, the AD Line has been flat since late May and shows some relative strength. The green arrows show the three surges, but we have yet see a follow through breakout. A break above the prior highs would turn this indicator bullish.
SPY opened strong, remained strong and closed strong. We have seen these one-day wonder rallies before though. Overall, SPY remains in the middle of a 3-4 week trading range with support in the 104-105 area and resistance in the 110-111 area. With a close just above 109, the ETF is now in the upper half of this range. Even though the cup is half full at this point, we have yet to see a convincing breakout. Look for a move above 111 in SPY and 50 in RSI to turn this chart bullish.
On the 30-minute chart, SPY gapped up and held the gap. It appears that Wednesday's late selloff was an aberration. The gap and surge to the high of the week are enough to call the short-term trend up. However, SPY is already at its first test. Last week's gap down turns into a potential resistance zone. In addition, the 62% retracement is still within spitting distance. RSI is also trading in its 50-60 resistance zone. Thursday's gap-surge must hold. Failure to hold this move would clearly reverse the short-term uptrend and would most likely have bearish medium-term consequences as well.
Key Economic Reports:
Fri - Jun 11 - 08:30 - Retail Sales
Fri - Jun 11 - 09:55 - Michigan Sentiment
Charts of Interest: AAPL, F, MON
This commentary and charts-of-interest are designed to stimulate thinking. This analysis is not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise). We all need to think for ourselves when it comes to trading our own accounts. First, it is the only way to really learn. Second, we are the only ones responsible for our decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. Among other things, this includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios BEFORE making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.
On the 30-minute chart, SPY gapped up and held the gap. It appears that Wednesday's late selloff was an aberration. The gap and surge to the high of the week are enough to call the short-term trend up. However, SPY is already at its first test. Last week's gap down turns into a potential resistance zone. In addition, the 62% retracement is still within spitting distance. RSI is also trading in its 50-60 resistance zone. Thursday's gap-surge must hold. Failure to hold this move would clearly reverse the short-term uptrend and would most likely have bearish medium-term consequences as well.
Key Economic Reports:
Fri - Jun 11 - 08:30 - Retail Sales
Fri - Jun 11 - 09:55 - Michigan Sentiment
Charts of Interest: AAPL, F, MON
This commentary and charts-of-interest are designed to stimulate thinking. This analysis is not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise). We all need to think for ourselves when it comes to trading our own accounts. First, it is the only way to really learn. Second, we are the only ones responsible for our decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. Among other things, this includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios BEFORE making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.
About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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